Credit Card Default Rate

By definition, a credit card default rate is a penalty rate that is imposed on a credit card once the cardholder violates the terms and conditions attached to the card.

The credit card default rate is also called the universal rate and is the highest possible interest rate that can be imposed.

The average credit card default rate from major companies is 29%. Chase, CitiBank, and Discover all charge a default annual percentage rate of 29.99%. HSBC, on the other hand, charges, 31.99%. Other credit card companies are not far behind. What triggers a credit card default rate? Most reasons that credit card companies give to justify credit card default rates include: missing the due date (or at least, not being able to make pay the minimum payment by the due date), going over the credit limit, and making a payment that is not accepted by the bank. Sometimes, banks include the following factors when determining whether a cardholder must receive a credit card default rate: how long the cardholder has had the account, the severity of the infraction, the performance of the cardholder in the past, and the type of relationship the cardholder has had with the company and other credit card companies, as well.

In the past, once a credit card default rate was applied to one account, it will apply to all. So, if a cardholder went default on one credit card, he should expect all his other cards to follow suit. This was a practice that has been going for decades. Thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009, it is now banned. The Credit CARD Act of 2009 prevents credit card companies from randomly increasing the interest rate of a credit card that is in good standing simply because of reasons that are not related to the account holder’s performance with that card.

Although not all companies charge a credit card default rate, it is always better to ask and be clear about it on the onset of the credit card application. However, for those who do get into trouble with the credit card default rate, the solution does not lie on ignoring the consequences and continuing to pay for the minimum requirement. Studies and calculations have shown that a $5,000 debt on a credit card default rate can rack up to $4,995 of additional costs due to interest and other fees. So, what should you do? Once you receive a notice of your card being in default, you should contact your credit card company immediately and ask them for a payment plan or scheme that you can work on. Most companies give in to such requests since they’d rather get some money than nothing at all.


Source: Credit Cards For People With Bad Credit Rating

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